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If you're thinking of setting up an ecommerce business or just a side hustle to earn some extra cash, you'll probably have heard of dropshipping. Dropshipping allows you to sell online without having to worry about manufacturing, storing or shipping products – that's all managed by a dropshipping supplier.
But while it sounds simple in theory, setting up and running a dropshipping business can be quite complicated. This guide explains how dropshipping works, how to find a dropshipping supplier and how to increase your chances of success when selling online.
Dropshipping is an online selling business model that doesn't require you to keep any items in stock. Instead, whenever you sell an item to a customer, you buy that item at wholesale cost from a third-party supplier. This supplier then ships the product directly to the customer on your behalf.
This means that you never actually store or handle the product yourself. Essentially, dropshipping means selling someone else's products and taking a share of the profits.
Here's how it works:
Yes, dropshipping is legal in Australia.
However, you'll need to make sure the products you offer can be legally sold in Australia. You'll also need to comply with the Competition and Consumer Act and the Australian Consumer Law.
To ensure you comply with the above mentioned acts, it could be in your business' interest to engage a law firm for document preperation.
Dropshipping can offer a simple way to earn extra income on the side or help your ecommerce business grow. However, there's no guarantee of making a profit, so it's essential that you plan carefully and set your dropshipping business up for success. The following are some key steps you should take:
You'll need to complete the following steps if you want to set up an online dropshipping store:
Finding high-quality items that you can sell for a profit can be tricky, but doing as much research as you can will help. To start with, you should do the following:
Products and categories suited to dropshipping tend to include items that are relatively cheap and easy to ship. The following are some examples of products that are suitable for dropshipping:
You can use dropshipping to sell products from your own online store, but it's also permitted on a wide range of popular online marketplaces and ecommerce platforms, including the following:
Before you sign up for an account on any marketplace, check the terms and conditions to make sure dropshipping is allowed.
You'll need to carefully compare a range of dropshipping suppliers to find a reliable partner for your business. Cost will be a major consideration, but you'll also need to factor in the supplier's track record and shipping times as well as its refunds and complaints handling processes. Perhaps even more importantly, any supplier you choose must be a prompt and effective communicator.
You can contact individual manufacturers and wholesalers directly, or find them using supplier directories like Worldwide Brands and SaleHoo.
Check out the table below for details of a few popular dropshipping supplier directories.
| Pros | Cons | |
|---|---|---|
| Oberlo |
|
|
| Doba |
|
|
| Wholesale Central |
|
|
| Worldwide Brands |
|
|
| SaleHoo |
|
|
Use the following checklist of questions to help you find the best dropshipping supplier for your needs.
The following are some of the strategies you can adopt to help boost sales for your dropshipping business:
There are a few key risks and problems you'll need to be wary of when dropshipping:
If you're selling products online as a business rather than a hobby, you're required to register for an ABN. Check out this guide from the ATO to understand the difference between a business and a hobby.
There are a couple of other important reasons why it's a good idea to register for an ABN. Not only will many dropshipping suppliers refuse to partner with you unless you have an ABN, but when you have an ABN you can also obtain an Australian domain name.
The good news is that it's easy (and free) to register for an ABN online.
Depending on what you're selling, you may also be required to apply for other business licences and permits. Visit the Australian Business Licence and Information Service (ABLIS) for more details.
There are two main types of tax you'll need to consider when dropshipping: income tax and GST.
If you're selling online as a business, you'll need to report all your earnings to the ATO. And if your business has an annual turnover of $75,000 or more, you'll also need to register for and charge GST.
In addition, as of 1 July 2018, the ATO also introduced new GST rules. If you dropship low-value imported goods (valued at $1,000 or less) to Australian customers, you may need to charge GST on these items. You can find more information from the ATO or by contacting a registered tax agent.
Ultimately, dropshipping is worth considering if you're looking to build an ecommerce business. But if you approach it expecting to earn easy money, you'll be setting yourself up for failure.
A successful dropshipping business requires careful preparation and planning as well as an ongoing commitment to make each customer's experience as smooth and seamless as possible.
So, if you think dropshipping is the way forward for your online business, it's time to start researching your options.
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